October 17, 1989
TO: CLOSED-END FUND MEMBERS NO. 55-89
RE: NO-ACTION LETTER PERMITTING CLOSED-END FUND TO PURCHASE
__________________________________________________________
The Division of Investment Management recently issued the
attached no-action letter permitting Pilgrim Regional Bank Shares
Inc., a closed-end diversified management investment company, to
purchase its shares from shareholders who own fewer than 25
shares.
The fund estimated that it has 1,500 shareholders who each
own fewer than 25 shares of stock with a maximum asset value of
approximately $256. The annual cost for maintaining each
shareholder account is estimated by the fund to be at least
$10.00 per account, not including other activity costs (e.g.,
printing and mailing of shareholder reports) which are at least
$5.00 per shareholder annually.
The fund believes that it is capable of earning an annual
average return of approximately 10% on its assets. Therefore,
the fund believes that accounts with an asset value of less than
$150.00 (approximately 14 shares) are unable to generate the
incremental revenues required to pay for the account, so as not
to disadvantage larger shareholders. However, because of the
imprecise nature of its cost estimates and the relatively large
brokerage commissions paid on small securities transactions, the
fund thought it would be best to make an offer to purchase shares
from all shareholders with 24 shares or fewer. The purchase
price of the shares purchased would be the lower of market value
or net asset value.
The fund represented that its repurchase program would be
made in reliance on rule 23c-1 of the Investment Company Act of
1940. The fund noted that the staff previously granted a similar
no-action request to CNA Income Shares, Inc. (pub. avail.
February 6, 1976).
Amy B. Rosenblum
Assistant General Counsel
Attachment